I’d like to be positive. The new Governor has barely got his feet under the table and is a decent man. Amidst sky-high expectations, he faces a formidable task. Yet my instincts tell me that “forward guidance” is counter-productive and could even be highly dangerous.
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Rising energy costs hit consumers and firms, hinder growth and also stoke up inflation, especially in an oil-importing country like the UK. It’s particularly concerning that crude is rising despite growing evidence that the global economy is once again starting to slow.
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The UK is locked in its weakest recovery in statistical history. Revised figures suggest the economy remains 3.9pc smaller than its 2008 pre-crisis peak, even worse than the previously estimated 2.6pc shortfall. Everyone wants to believe that recovery is within reach and maybe, just maybe, the smiling Canadian with degrees from Harvard and Oxford is the missing ingredient.
Here in the UK, our GDP increased by just 0.3pc during the first quarter of 2013, while the United States registered 0.6pc growth. The Eurozone, meanwhile, remained stuck in reverse gear, its economy contracting 0.2pc over the same period.
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The danger is, though, that the markets lose patience, sparking a violent “Lehman style” financial meltdown, with all the global fall-out that would entail. While that would be disastrous, the worst of all possible outcomes, there is a growing sense that it is only another “Minsky moment”, combined with some serious civil unrest, that will force the eurozone’s main policy players to face the really tough decisions.
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It doesn’t surprise me that some of the UK’s leading banks are technically insolvent. What does surprise me is that it’s taken until last week for a respected professional body like Pirc to state the obvious.
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The extra resources, Lagarde’s officials dutifully claimed, will be “available for the whole IMF membership, not earmarked for any particular region”. Everyone knows this is nonsense. This higher IMF firewall has been created, the money being reluctantly made available by member states, because governments around the world are petrified the eurozone could implode, sparking another “Lehman moment”.
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Just when you hoped it really was “solved”, the “eurozone crisis” has roared back onto the global agenda. Like a dripping tap, a lingering bad smell, the fundamental contradictions at the heart of monetary union can be blanked-out for a while but refuse to go away. The busted banks, the grotesque indebtedness, the inherent contradictions – in recent days they’ve all burst back into view.
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QE begins and Liam locks horns with Hugh Hendry in a fabled on-air clash
LIAM HALLIGAN 